U.S. Manufacturing and Competitiveness

In the 1950s General Motors sales exceeded 50% of total auto sales in the United States. Imported cars amounted to only small percentage of that total. By 1992 the Ford Taurus was the best selling car and Honda was on its tail. In 1995 all the American car companies were feeling quite successful despite the growing size of Japanese imports. Today the “Big Three” is on the verge of becoming the “Little Two” as more and more Americans buy cars from foreign manufacturers.

At the same time as cars are coming from foreign manufacturers we have seen appliances, clothing, and almost everything else we buy come from other nations. The manufacturing base of our nation has deteriorated to such an extent that the population of our Midwestern industrial complex has no place to work. This has been the result of big corporations moving their manufacturing to other nations that have lower labor costs. Unfortunately American car manufacturers are not in that category. They are failing due to the second rate quality of their cars. Quality of products has been a big issue for American manufacturers. We used to laugh at the inferior quality of Japanese goods and they have more than overcome that stigma. China is now going through a similar phase and it’s likely they too will overcome their quality issues. Many United States manufacturers have not yet address the issue of quality.

I know. I worked for American manufacturers for 45 years. There were always new quality programs being installed. Most of them really did not work. The reason is that the workers themselves were not devoted to producing quality products. This is not a government issue. A free society does not enable government interference in private enterprise. Government can encourage job development though tax incentives but cannot involve itself in the operation of any company.

Michael E. Porter, a Harvard Business School authority on American competitiveness suggests in a Business Week article that the United States needs a long term strategy to resusitate our manufacturing prowess. I believe he is correct. The problem is that our government lacks the will to develop this plan. The reason is that lobbyists and special interests have more influence on Congress than the real needs of our nation.

I intend to write about U.S. manufacturing and competitiveness in many of my future blog entries.

SOCIALISM

I thought I might be a socialist until I read these definitions.

Webster’s New World Dictionary offers this definition:

1 any of various theories or systems of the ownership and operation of the means of production and distribution by society or the community rather than by private individuals, with all members of society or the community sharing in the work and the products

2 [often S3] a) a political movement for establishing such a system b) the doctrines, methods, etc. of the Socialist parties

3 the stage of society, in Marxist doctrine, coming between the capitalist stage and the communist stage, in which private ownership of the means of production and distribution has been eliminated: see COMMUNISM (sense 2)

I listened to all the commentators and have read a few other explanations of our economy and concluded that I am a student of Adam Smith with two exceptions. Totally uncontrolled markets can lead to greed and monopolies. Greed has led this nation to its current situation. Senior executives of large corporations are earning an average of $4,000 per hour. These high earnings are reported to be common among Wall Street managers too.

One need to go no further than the preamble to our constitution “… to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity…” In order to ensure domestic tranquility and promote general welfare our nation needs to pass laws that limit the power of a few that would work against our general welfare.

This does not mean we need socialism. It means we enforce what are known as antitrust law in the United States. From Wkipedia

Competition law, known in the United States as antitrust law, has three main elements:

prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.
banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.

The banking industry has been given free reign in its management. I and my wife were offered opportunities for new credit cards daily over the past few years. We accepted two of those offers increasing the number of cards from two to four. I have read that the average person has 13 credit cards. Fareed Zakaria pointed out in the October 20, 2008 issue of Newsweek that household debt was $680 billion in 1974 and now amounts to $14 trillion. Type in the words “there is a silver lining” into Google and you will see that his column has struck a significant cord.

John McCain is an adherent of the free markets philosophy that has brought our nation to this economic meltdown. Barack Obama has avoided taking a position. Given the philosophies of the Democrats and Republicans I have to anticipate that Barack Obama’s election will bring the needed regulations that will promote our general welfare. It won’t be socialism.

ETHICS

The issue of ethics was brought to my attention by a community college instructor of mine. She teaches both finance and ethics classes. When that teacher brought in two speakers to her personal finance class hawking their services I found myself questioning her ethics. After all, the students are expecting learning experience not a sales experience. When one guest speaker came to explain long term health care insurance and bad mouthed Consumers Reports, I suspected the worst. CR warned about the pitch and offered specifics that matched the speakers pitch. Wow! I wonder, could the class instructor be receiving a kick back for every student signing up? I do not know but she is a client of both of her guest speakers. The instructor apparently has ignored the ethical implications even if there is nothing inappropriate in their relationships.

My dentist performed root canal and installed a new bridge in my mouth. The entire area is still soar and the bridge is uncomfortable. The bill is $3,500. I pointed out to him that when my mechanic makes a mistake he refunds my money. The dentist still wants to be paid.

This issue is even more significant in the current race for president. Smears and innuendo appear to be a stock in trade part of the McCain campaign. Are some of the concerns raised by McCain legitimate? Yes. The problem is that the primary focus of John McCain has been smears. The lack of focus on real issues is conspicuously beyond belief. Perhaps his slogan should be “Service, Country First, Ethics Last.”

The Bill Ayers thing is totally ridiculous. The Annenberg Foundation sponsored a group that included both Ayers and Obama. This is hardly a terrorist plot and is confirmed by factcheck.org.

Not yet mentioned by the McCain campaign but many of his surrogates is the Reverend Wright issue. It is a legitimate question when people ask how Obama could not have known about Wright’s views of America. There is sufficient evidence that Obama did know about those views.

John McCain opposed the Bush tax cuts when they were first proposed. More recently he has given wholehearted support for those cuts and wants them made permanent. Was that a flip flop or an ethics issue?

Finally there is the question of Sarah Palin. John McCain supports her without question but many highly respected conservatives doubt her ability to hold the position of president. Isn’t this a breach of ethics for McCain to offer her as his stand in?

Long Term Care Insurance

If you are very rich you can afford to hire a care giver or live in an assisted living facility or nursing home. If you are not rich your family will have to struggle with the reality of giving you care.

I enrolled in a Personal Finance class at my local community college (Pierce College, Woodland Hills, CA). The description said, “learn the basics of investment strategies, The new Medicare RX plan, Long Term Care Insurance, financial planning, the law, as well as techniques to minimize taxes, and how to create an income in retirement.” It turned out that two of the six classes I attended were sales pitches. The other four provided very little in the way of new information or ideas.

One session was presented by a man who claimed to be a financial adviser. His real purpose was to enroll class members with his firm that manages your savings. The cost is just 1% of the value of your investments per year. He would not consider anyone with less than $250K as a client. So that is a mere $2,500 per year for the least eligible client.

Another session, my last, was a series of scare tactics to enroll with the presenter for long term care insurance. This presentation was made by a woman who wore dark sun glasses during the entire presentation. I felt like I was at one of those presentations at a local restaurant that includes a free lunch. She cautioned the class to disregard Consumers Reports evaluations of this insurance. After questioning her about the soundness of the insurance companies offering these policies, and being asked to be quiet by the class instructor, I left the room. Reaching my house I, of course, immediately went to the Consumers Reports website.

Here is what I found on the CR website.

Sales pitches and their catches

To sell you on long-term-care insurance, agents may play fast and loose with the facts. These pitches are drawn from an insurance-industry publication and interviews with agents.

The pitch: You need to buy long-term-care insurance when you are young. More than 40 percent of people who need long-term care are under age 65.

The catch: Only 159,000 of the 238 million people under age 65, or less than 1 percent, receive nursing-home care.

The pitch: There is nearly a 50 percent chance that a person will require 24-hour care in a skilled-nursing facility.

The catch: One percent of those ages 65 to 74 live in a nursing home, 4 percent of 75- to 84-year-olds, and 19 percent of those age 85 and older.

The pitch: If you are over age 65, you don’t need inflation protection.

The catch: According to the most recently published figures, the average age of admission to a nursing home is 83, and costs are expected to rise more than 5 percent a year. At age 65, you face 18 more years of inflation.

The pitch: You’ll get into a better nursing home if you have insurance.

The catch: While some nursing homes may prefer to take residents who do not have to rely on Medicaid, there is no guarantee that those homes provide better care. To check on any nursing facility you are considering, visit the ConsumersUnionCenter for Consumer Health Choices Web site at www.consumersunion.org/health/nursing-rpt603.htm.

Concerned with Race, Religion, and Ethnicity

Is there a Bradley Effect in recent polls showing Barack Obama’s lead of as much as 11%? I do not know. For those not familiar with the theory it is that participants in polls will lie about their willingness to vote a Black man. Tom Bradley, was the Black mayor of Los Angeles. He ran for governor of California in 1982. Although many polls showed him significantly leading, he lost the election.

I fear that the theory has merit. The reason is that there have been too many other Black candidates who narrowly won or lost after polling data showed a significant lead. Douglas Wilder, former Virginia governor, is an outstanding example of someone who had polls showing a 9% lead but won by less than 1%. Others include Harold Washington’s four-point victory in the 1983 Chicago mayoral race despite a double-digit lead in polls, and David Dinkins’ two-point victory over Rudy Giuliani in 1989 to be New York‘s mayor despite a 14-point margin in late polls.

I personally believe that voting polls are trend indicators at best. It’s not just people not telling the truth but many people not wanting to participate in any poll. I question the validity of polling when so many people consider poll taker questions an invasion of privacy.

Sadly, too many Americans are more concerned with race, religion, and ethnicity than their own well being. This example from a John McCain rally is a most telling indicator. It is so bad in this country that people were opposed to Mitt Romney as the Republican nominee because his religion is Mormon. I always thought Mormon is a religious sect just like Lutherans, Baptists, or Catholics. What do we Jews know?

God gave man the right to choose. He chose to eat the apple. I conclude that Americans have the right to choose John McCain. Well, the selection of president may be a flawed process but the U.S.A. is still the best place in the world. I many not be happy but I will accept the results. Will those bigots accept the results if Barack Obama is elected?